Why Are These Four Stocks Making A Late Surge?

Shareholders of Amicus Therapeutics, Inc. (NASDAQ:FOLD), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Novavax, Inc. (NASDAQ:NVAX), and Diamond Offshore Drilling Inc (NYSE:DO) are certainly happy today, as the value of their holdings in the stock are surging in afternoon trading thanks to various catalysts. Let’s find out why and examine what the smart money thinks of the four stocks.

Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 52 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.7% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).

Amicus Therapeutics, Inc. (NASDAQ:FOLD) is up by 12.9% as sentiment for the stock improves. Amicus’ stock tanked in October after the company said it will not file the NDA for migalastat for the treatment of Fabry disease this year after communicating with the FDA. The FDA wants more information, which will take time to complete. Despite the setback, Amicus has potential, as investors believe migalastat has better dosing superiority in 30%-to-50% of Fabry patients than current treatments such as Fabrazyme and Replagal. With $3.05 in cash per share, Amicus has enough money to keep the lights on for a while and finance any additional data the FDA needs.

According to our data culled from approximately 730 elite funds in our database, smart money investors were bullish on Amicus Therapeutics, Inc. (NASDAQ:FOLD) in the second quarter. 31 funds reported stakes as of June 30 worth $687.19 million, accounting for 41.90% of the stock’s float, up from 26 funds and $520.91 million respectively at the end of March. Joseph Edelman‘s Perceptive Advisors owned 14.44 million shares at the end of the second quarter.

ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) has rallied by 15.3% after the FDA granted the company’s NDA for NUPLAZID priority review. ACADIA Pharmaceuticals is seeking FDA approval of NUPLAZID for the treatment of psychosis associated with Parkinsons disease. The market could be substantial, as one million Americans suffer from Parkinsons disease, with an estimated 40% experiencing Parkinsons-related psychosis. A priority review speeds up the review timeline to six months from ten months, and gives NUPLAZID a PDUFA date of May 1, 2016. Hedge funds were bullish on ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) in the second quarter. 26 funds reported owning ACADIA stakes worth $1.11 billion, holding 26.30% of all shares. Julian Baker and Felix Baker‘s Baker Bros. Advisors owned 20.48 million shares at the end of the second quarter.

On the next page, we examine why Novavax and Diamond Offshore Drilling are rallying.
Novavax, Inc. (NASDAQ:NVAX) is up by 11.2% as sentiment among investors improves. Analysts are optimistic, as seven analysts have a ‘Buy’ rating, while one has a ‘Hold’ rating, with their consensus price target standing at $15.50. The smart money on the other hand is not overly bullish, as 17 funds owned $119.07 million of the company’s shares, or just 4.00% of its outstanding common stock, on June 30, with Baker Bros. Advisors also holding a large position in Novavax, Inc. (NASDAQ:NVAX), of 1.95 million shares. Shares of the biotech company are down by almost 50% from their highs in early August but are still up by more than 15% year-to-date.

Diamond Offshore Drilling Inc (NYSE:DO) shares are up by 12.7% after the company reported third quarter earnings of $0.99 per share on revenues of $609.74 million, beating estimates by $0.39 per share and $15.19 million, respectively. In conjunction with its earnings report, Diamond Offshore also announced that Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) will terminate contracts for two Diamond Offshore rigs ahead of schedule in exchange for extending another contract by 875 days. Although shares of offshore drillers have been beaten up due to low crude prices, Diamond Offshore Drilling Inc (NYSE:DO) may have an opportunity to buy assets on the cheap as it has one of the cleanest balance sheets in the sector. This quarter’s earnings report was pretty good, and shares will rise once crude prices rebound. Southeastern Asset Management owned 1.3 million shares of Diamond Offshore at the end of the second quarter.

Disclosure: None